Descartes Plots A Record Course In New Millennium
Written By: Steve McVey
Published On: June 2000
Descartes Plots A Record Course In New Millennium
Waterloo, Ontario based Descartes Systems Group reported record revenue
for the first quarter of fiscal 2001 ended April 30, 2000. Focused on
building its transaction-based revenue model, Descartes still finds profits
out of reach.
and network revenue totaled $8.8 million in the first quarter of fiscal
2001, an increase of 138% from $3.7 million in the first quarter of fiscal
2000 and representing an increase of 33% over license and network revenue
of $6.6 million in the fourth quarter of fiscal 2000 (Q4 FY00). [see Figure
revenue for the first quarter topped $13.6 million, an increase of 11%
from revenue of $12.2 million in Q4 FY00 and up 20% from revenue of $11.3
million in the same quarter last year. Descartes' transition to a network
business model was reflected in the transition in revenue mix for license
and network revenue, services revenue and hardware revenue over the past
year. In Q1 FY00, services revenue was $5.7 million or 61% of revenue
while license and network revenue was $3.7 million or 39% of revenue,
net of $1.9 million in hardware revenue. In the current quarter, license
and network revenue reached $8.8 million, representing 66% of revenue
while services revenue reached $4.6 million, representing 34% of revenue.
The company recorded approximately $200,000 in hardware revenue in the
loss for the quarter was $23.5 million or ($0.56) per share compared with
a net loss of $3.5 million or ($0.09) per share in Q4 FY00. Net loss for
the quarter includes a one-time charge related to the purchase of in-process
research and development of approximately $19 million and amortization
charges of approximately $2 million related to the acquisition of E-Transport,
it does not break down its revenue into licenses and network revenue,
Descartes expects network revenue to grow as a segment of its total e-commerce
revenue. The company defines network revenue as the subset of its revenues
comprised of recurring subscription and transaction based revenues. Customers
typically pay an up-front technology transfer fee followed some three
to nine months later by monthly or per transaction fees.
for the quarter include the formation of DSD Solutions, Inc., a privately-held
company that inherits Descartes' direct store delivery solutions business.
Descartes transferred approximately 160 employees to the new venture in
exchange for ongoing royalties from software sales and a 20% interest
with an option to acquire an additional 20%. Taking the helm at DSD Solutions
is Mark Lee, former board member and ten-year veteran of Descartes.
also completed its acquisition of E-Transport, Inc., a logistics exchange
solution provider based in Pittsburgh, PA. Descartes offered $80 million
(USD) in stock to the privately-held E-Transport. E-Transport's Marketplace
is an online B2B transportation marketplace for shippers, carriers, and
intermediaries, described as "a neutral switching station" where trading
partners from around the world can conduct business, but still use their
preferred data format and transmission means.
Despite a ten percent slump in revenue a year ago in fiscal 2000, Descartes
maintains a strong position in the advanced logistics planning and execution
software market and its first quarter results mark renewed growth. Its
record first quarter revenues indicate that the market is convinced of
its viability, even though Descartes has been losing money since 1995.
This confidence is reflected in the company's stock, which, in spite of
recent market tumbles, has brought an infusion of capital for use in funding
operations and making acquisitions. Many top financial analyst firms have
predicted a positive cash flow for Descartes by as early as 4Q 2001 (ending
Jan. 31, 2001).
its technological lead and large, referenceable customer base, Descartes
will continue to prosper over the next few years, but will meet with increased
competition from vendors like i2 Technologies, which is developing its
own advanced logistics capabilities as part of TradeMatrix, and smaller
companies such as Roadnet Technologies and G-Log Tech, which share many
of Descartes' strategic alliance partners (Ernst & Young, Cap Gemini,
Intermec, and Symbol Technologies).
Users in consumer-direct businesses characterized by volatile demand whose
customers place high value on prompt delivery of goods should place Descartes
on any short list. Home delivery is a major market for Descartes, whose
DeliveryNet solutions are used by customers in Europe and North America,
including Europe based Star's Services, LM Solutions, and U. S. based
Webvan. Descartes also numbers many e-commerce startups among its home
delivery customers, such as PurpleTie.com, Parachute, CleanWave, Grocery
Gateway, YourGrocer.com, and Webvan. Descartes' success-based pricing
model offers an attractive alternative for fledgling e-commerce companies
due to smaller initial fees.